Share

On1.4.2014 the Balance Sheet of Anant, Sampat and Gunvant Was as Follows : the Firm Closes Its Books on 31st March Every Year. Partners Share Profits in the Ratio of Their Capitals. Prepare Gunvant'S Capital Account to Be Presented to His Executors - CBSE (Arts) Class 12 - Accountancy

Question

On1.4.2014 the Balance Sheet of Anant, Sampat and Gunvant was as follows :

 Liabilities Amount Rs Assets Amount Rs Sundry Creditors General Reserve Capital Reserve     Anant    30,000    Sampat   15,000    Gunvant  15,000 9,000 9,600       60,000 Bank Bills Receivables Stock Tools Furniture 15,600 18,000 18,000 3,000 24,000 78,600 78,600

Gunvant died on 30.9.2014. Under the terms of Partnership Deed, the executors of the deceased partner were entitled to:

(a) The amount standing to the credit of partner's capital account.
(b) Interest on capital @12% per annum.
(c) A share of goodwill on the basis of twice the average of past three years profits.
(d) A share of profit from the closing of last financial year to the date of death on the basis of last year's profit.

The profits of the last three years were as follows:

 Year Profit 2011 - 2012 18.000 2012 - 2013 21,000 2013 - 2014 24,000

The firm closes its books on 31st March every year. Partners share profits in the ratio of their capitals.
Prepare Gunvant's Capital Account to be presented to his executors

Solution

 Gunvant’s Capital Account Dr. Cr. Particulars Rs Particulars Rs To Executor A/c 31,800 By Balance c/d By Interest on Capital A/c By Profit and Loss Suspense A/c By Anant’s Capital A/c By Sampat’s Capital A/c By General Reserve A/c 15,000 900 3,000 7,000 3,500 2,400 31,800 31,800

Working Notes:

WN 1 Calculation of Interest on Gunvant’s Capital

Interest on Capital = 15000 xx 12/100 xx 6/12 = 900

WN 2 Calculation of Gunvant’s share of profits

Profit of last financial year (2013-14) = 24,000

Gunvant's share in profits = 24000 xx 1/4 xx 6/12 = 3000

Average Profit = (18,000+21,000+24,000)/3 = 21000

Goodwill of the firm = 21000 xx 2 = 42000

Gunvant's Share of Goodwill = 42000 xx  1/4 = 10500

Anant will pay = 10500 xx 2/5 = 7000

Sampat will pay = 10500 xx 1/3 = 3500

WN 4 Calculation of Gunvant’s Share in Reserve Fund

Gunvant's Share in General Reserve = 9600 xx 1/4 = 2400

Note: Since, here no information is given regarding the share acquired by Anant and Sampat, therefore, their gaining ratio is same as their new profit sharing ratio i.e. 2:1

Is there an error in this question or solution?

Video TutorialsVIEW ALL [2]

Solution On1.4.2014 the Balance Sheet of Anant, Sampat and Gunvant Was as Follows : the Firm Closes Its Books on 31st March Every Year. Partners Share Profits in the Ratio of Their Capitals. Prepare Gunvant'S Capital Account to Be Presented to His Executors Concept: Concept of Goodwill.
S